There are those in the financial hinterlands who believe that the latest bout of indigestion in equities is simply another round of petty games played by central bank elitists who continue to exert extreme control, especially at times when it seems a correction may be at hand.
There are others who believe that the entire eight years of QE-and-ZIRP-inspired gains have been the exclusive province of the central banks and that they are preparing to pull the proverbial rug out from under markets via interest rate hikes and a general cessation of currency creation.
Both parties may be right, insofar as the central banks have been the epicenter of all financial activity, surreptitiously aiding the money center banks and primary dealers closest to the Fed's largesse.
Thus, the declines on the NASDAQ - not just today, but for the past three weeks - are sending signals to smaller market participants and there has been the beginning of a realignment of asset allocations, from tech to cash, from consumer staples and cyclicals to dividend-payers and utilities.
The issue at present, as was the case in 2008-09 and most other major market corrections or reversals from bull to bear, is that nowhere is there a safe place to hide, though the usual standouts are cash, precious metals and treasuries. On the latter, the 10-year note continued its ascent, finishing the day at 2.37, a multi-month high. That's a notable move, signifying that money may be indeed becoming tighter, even though that is a relative term, heading north from a real rate approaching zero.
At this juncture, it's still too early to raise the alarm bells, though the heavily-leveraged may be getting margin calls in short order. The NAZ is closing in on a five percent decline from the June 9 high of 6341.70, currently at a level of -3.98%. The even one percent loss on the NASDAQ today was followed in close order by the other major indices.
Caution is advised. Do NOT buy this dip as there are far too many worrying factors in the mix.
At the Close, 7/6/17:
Dow: 21,320.04, -158.13 (-0.74%)
NASDAQ: 6,089.46, -61.39 (-1.00%)
S&P 500: 2,409.75, -22.79 (-0.94%)
NYSE Composite: 11,702.42, -107.07 (-0.91%)
Thursday, July 6, 2017
Stocks Split, NASDAQ Gains, Dow Flat
There is a definite surreal feel to stocks these early days of summer. While the NASDAQ has generally been the whipping boy through the latter stages of June and into July, the reverse was true on Wednesday as traders returned from a truncated long weekend.
The NASDAQ tacked on 40 points, but the other broad measure, the NYSE Composite, fell 26. The Dow was off by one point, while the S&P added three-and-a-half.
While this appears to be sector rotation and stock picking, the unruly movements may portend something more sinister in the near future. It could be nothing, but split decisions on the major indices usually indicate market turmoil, not the calm, placid environment with low VIX which has been a feature of the long bull run since March of 2009.
The VIX has been elevated of late and spiked recently, but hovering around the 11-12 region is nothing alarming. Should the VIX begin to rise day-over-day, worries may emerge and turn reluctant buyers into outright sellers.
Whatever the financial pundits insist about the strength of the economy, there are troubles, as indicated by the FOMC minutes from June which were released on Wednesday. The members were split over inflation and increases in the federal funds rate, a strong indication that the Fed - which has been relied upon excessively to control the economy - may not have the tools with which to battle a recessionary environment, which many believe is overdue.
In any case, this shortened week may not be enough to develop any kind of trend, other than extending the weird trading patterns which are becoming more and more confounding to fundamental analysts.
At the Close, 7/5/17:
Dow: 21,478.17, -1.10 (-0.01%)
NASDAQ: 6,150.86, +40.80 (0.67%)
S&P 500: 2,432.54, +3.53 (0.15%)
NYSE Composite: 11,809.49, -26.23 (-0.22%)
The NASDAQ tacked on 40 points, but the other broad measure, the NYSE Composite, fell 26. The Dow was off by one point, while the S&P added three-and-a-half.
While this appears to be sector rotation and stock picking, the unruly movements may portend something more sinister in the near future. It could be nothing, but split decisions on the major indices usually indicate market turmoil, not the calm, placid environment with low VIX which has been a feature of the long bull run since March of 2009.
The VIX has been elevated of late and spiked recently, but hovering around the 11-12 region is nothing alarming. Should the VIX begin to rise day-over-day, worries may emerge and turn reluctant buyers into outright sellers.
Whatever the financial pundits insist about the strength of the economy, there are troubles, as indicated by the FOMC minutes from June which were released on Wednesday. The members were split over inflation and increases in the federal funds rate, a strong indication that the Fed - which has been relied upon excessively to control the economy - may not have the tools with which to battle a recessionary environment, which many believe is overdue.
In any case, this shortened week may not be enough to develop any kind of trend, other than extending the weird trading patterns which are becoming more and more confounding to fundamental analysts.
At the Close, 7/5/17:
Dow: 21,478.17, -1.10 (-0.01%)
NASDAQ: 6,150.86, +40.80 (0.67%)
S&P 500: 2,432.54, +3.53 (0.15%)
NYSE Composite: 11,809.49, -26.23 (-0.22%)
Wednesday, July 5, 2017
NASDAQ Continues Short-Term Slide; Bond Yields Soar
Happy Independence Day!
While plenty of Americans were celebrating the founding of their nation, drinking cold ones and grilling hot ones, the elitist scum that wants to control everybody's lives couldn't take the hint - and a four-day weekend - returning to the trading desks Monday for another round of Sell That Tech Stock.
The major indices were all rising, with the notable exception of the NASDAQ, upon which the most speculative stocks are traded, closing down just shy of 1/2 percent on the day.
Closing below its 50-day moving average for the third straight session, the NASDAQ is exhibiting a unitary weakness, unshared by its cohorts. The last time the NASDAQ made such a breach was at the very end of December, 2016. Six months have passed since the end-of-year scare, so it is notable, but the index is only down 3.66% since the 6341.70 top on June 9.
The selling seems to not be abating any time soon. The NASDAQ has closed lower 11 of the last 17 sessions, inclusive of the June 9 FAANG debacle.
Obviously, a multi-day decline of less than four percent is alarming to almost nobody, though closer analysis does give one reason to pause and possibly for many to liquidate out of high-multiple, overpriced equities into the safety of dividend-paying plays such as those readily found on the Dow or within the higher echelons of the S&P.
Divergence of the NASDAQ from its close peers bears notice, as has been mentioned here at Money Daily on a number of occasions over the past few weeks. Since it is easily the most bloated of the indices, it is most vulnerable to sprees of selling, or, as may be the case, cyclical rotation.
With that in mind, it may be amusing to some that the Dow posted an all-time intra-day high on Monday, but closed below the record closing high, though that mark may be surpassed on Wednesday, with traders flush with renewed animal spirits.
Otherwise, the eight-year-old bull market seems to be running on fumes, badly in need of something other than fresh fiat from central banks, which has been the primary fuel for the record rise over the long span.
Also worthy of notice is the continued sell-off in the 10-year note, sending yields as high as 2.35. The condition has prevailed since just after the latest interest rate hike on June 14, putting the federal funds rate at a multi-year high of 1.00-1.25%. It's also a marvel that the FOMC of the Fed has changed the game somewhat, targeting the rate in a range rather than offering a solid number. It gives the fakery some wiggle room, though bond brokers seem to be reacting as the Fed would wish, even though rising rates in a declining economy - of which the signs of are lurking everywhere - is a classic misalignment.
Hang on, diversify, or get off. Those are the current choices, though for specs, the last of those choices seems to currently be the most favored plan.
At the Close, 7/3/17:
Dow: 21,479.27, +129.64 (0.61%)
NASDAQ: 6,110.06, -30.36 (-0.49%)
S&P 500: 2,429.01, +5.60 (0.23%)
NYSE Composite: 11,835.72, +74.02 (0.63%)
While plenty of Americans were celebrating the founding of their nation, drinking cold ones and grilling hot ones, the elitist scum that wants to control everybody's lives couldn't take the hint - and a four-day weekend - returning to the trading desks Monday for another round of Sell That Tech Stock.
The major indices were all rising, with the notable exception of the NASDAQ, upon which the most speculative stocks are traded, closing down just shy of 1/2 percent on the day.
Closing below its 50-day moving average for the third straight session, the NASDAQ is exhibiting a unitary weakness, unshared by its cohorts. The last time the NASDAQ made such a breach was at the very end of December, 2016. Six months have passed since the end-of-year scare, so it is notable, but the index is only down 3.66% since the 6341.70 top on June 9.
The selling seems to not be abating any time soon. The NASDAQ has closed lower 11 of the last 17 sessions, inclusive of the June 9 FAANG debacle.
Obviously, a multi-day decline of less than four percent is alarming to almost nobody, though closer analysis does give one reason to pause and possibly for many to liquidate out of high-multiple, overpriced equities into the safety of dividend-paying plays such as those readily found on the Dow or within the higher echelons of the S&P.
Divergence of the NASDAQ from its close peers bears notice, as has been mentioned here at Money Daily on a number of occasions over the past few weeks. Since it is easily the most bloated of the indices, it is most vulnerable to sprees of selling, or, as may be the case, cyclical rotation.
With that in mind, it may be amusing to some that the Dow posted an all-time intra-day high on Monday, but closed below the record closing high, though that mark may be surpassed on Wednesday, with traders flush with renewed animal spirits.
Otherwise, the eight-year-old bull market seems to be running on fumes, badly in need of something other than fresh fiat from central banks, which has been the primary fuel for the record rise over the long span.
Also worthy of notice is the continued sell-off in the 10-year note, sending yields as high as 2.35. The condition has prevailed since just after the latest interest rate hike on June 14, putting the federal funds rate at a multi-year high of 1.00-1.25%. It's also a marvel that the FOMC of the Fed has changed the game somewhat, targeting the rate in a range rather than offering a solid number. It gives the fakery some wiggle room, though bond brokers seem to be reacting as the Fed would wish, even though rising rates in a declining economy - of which the signs of are lurking everywhere - is a classic misalignment.
Hang on, diversify, or get off. Those are the current choices, though for specs, the last of those choices seems to currently be the most favored plan.
At the Close, 7/3/17:
Dow: 21,479.27, +129.64 (0.61%)
NASDAQ: 6,110.06, -30.36 (-0.49%)
S&P 500: 2,429.01, +5.60 (0.23%)
NYSE Composite: 11,835.72, +74.02 (0.63%)
Saturday, July 1, 2017
Maine, Connecticut, Illinois, New Jersey Run Out of Time and Money
Stocks managed to end the week, and the month, without a complete and total collapse, with the Dow actually posting a substantial gain.
However, a Friday turned to Saturday and June to July, at least four states have failed to pass budgets, facing enormous deficits, the worst of the bunch being Illinois, currently with $15 billion in overdue payments backlogged.
In New Jersey and Maine, state governments went into shutdown mode, while Connecticut governor Dannel Malloy took over control of the state's spending after the legislature failed to pass a budget on time.p
In New Jersey, state parks and other public areas were closed on Saturday, sending a painful message to citizens of government overreach on a four-day Independence Day weekend supposedly celebrating freedom.
Illinois was dealt another crushing blow when US District Court Judge Joan Lefkow ruled that the state must begin making larger payments to Medicare providers that are owed billions of dollars.
These developments have been years in the making, from bloated statehouses, county, and city offices which overpay employees, offer golden medical and pension packages that the citizenry pays for in the form of higher taxes, and promotes schools that provide delicious salaries benefits for teachers while providing substandard education to forced-enrolled students.
Cops and firefighters collecting $100,000+ pensions are not unusual in any of these states, and the pensions and medical benefits of government employees overall have caused fiscal crises that could have - and should have - been handled years ago. None of this comes as a surprise, but the outcomes will be different from state to state. Some may plead to the federal government for a bailout of sorts, with the implied proviso that they will give up some of their sovereignty in the process.
Others may choose to raise taxes, implement austerity measures, but eventually, all of them will have to default on over-generous pension promises made to prior government employees. Many will also have to cut pay to current employees, which will prompt reactions from the public service unions, which should be outlawed under federal law, and eventually, if there is any sanity remaining in government at all, will be.
Enjoy what there is of your Independence Day weekend, but bear in mind, the United States of America has reached a turning point, a breaking point. States are reeling from decades of uncontrolled spending and liberal policies and the taxpayers are fleeing or simply giving up.
The policies of overspending which began in Washington, DC, and has trickled down to the states have bled the nation dry and hard choices are already at hand. Whether or not the politicians can muster the courage to make the needed changes - a dubious prospect at best - the American people must respond with vigor.
At the Close, 6/30/17:
Dow: 21,349.63, +62.60 (0.29%)
NASDAQ: 6,140.42, -3.93 (-0.06%)
S&P 500: 2,423.41, +3.71 (0.15%)
NYSE Composite: 11,761.70, +21.72 (0.18%)
However, a Friday turned to Saturday and June to July, at least four states have failed to pass budgets, facing enormous deficits, the worst of the bunch being Illinois, currently with $15 billion in overdue payments backlogged.
In New Jersey and Maine, state governments went into shutdown mode, while Connecticut governor Dannel Malloy took over control of the state's spending after the legislature failed to pass a budget on time.p
In New Jersey, state parks and other public areas were closed on Saturday, sending a painful message to citizens of government overreach on a four-day Independence Day weekend supposedly celebrating freedom.
These developments have been years in the making, from bloated statehouses, county, and city offices which overpay employees, offer golden medical and pension packages that the citizenry pays for in the form of higher taxes, and promotes schools that provide delicious salaries benefits for teachers while providing substandard education to forced-enrolled students.
Cops and firefighters collecting $100,000+ pensions are not unusual in any of these states, and the pensions and medical benefits of government employees overall have caused fiscal crises that could have - and should have - been handled years ago. None of this comes as a surprise, but the outcomes will be different from state to state. Some may plead to the federal government for a bailout of sorts, with the implied proviso that they will give up some of their sovereignty in the process.
Others may choose to raise taxes, implement austerity measures, but eventually, all of them will have to default on over-generous pension promises made to prior government employees. Many will also have to cut pay to current employees, which will prompt reactions from the public service unions, which should be outlawed under federal law, and eventually, if there is any sanity remaining in government at all, will be.
Enjoy what there is of your Independence Day weekend, but bear in mind, the United States of America has reached a turning point, a breaking point. States are reeling from decades of uncontrolled spending and liberal policies and the taxpayers are fleeing or simply giving up.
The policies of overspending which began in Washington, DC, and has trickled down to the states have bled the nation dry and hard choices are already at hand. Whether or not the politicians can muster the courage to make the needed changes - a dubious prospect at best - the American people must respond with vigor.
At the Close, 6/30/17:
Dow: 21,349.63, +62.60 (0.29%)
NASDAQ: 6,140.42, -3.93 (-0.06%)
S&P 500: 2,423.41, +3.71 (0.15%)
NYSE Composite: 11,761.70, +21.72 (0.18%)
Thursday, June 29, 2017
Which Way is Up? Stocks Battered Again; VIX, Bond Yields Exploding
Volatility is back, to the chagrin of equity investors who have enjoyed the easiest ride to Easy Street possibly in the history of the US stock market.
The VIX, a broad measure of market volatility, spiked today as high as 15.16, a huge move, considering the close on Wednesday was 10.03. That's better than a 50% move to the top, though the slaughter was interrupted and canceled midday, when it appeared the world was ending. No doubt, the PPT another central bank cohorts rushed to the aid of everybody in quelling the panic, sending the VIX back to 11.44 at the end of the session.
The Vix halting helped the major indices to some degree, though it could not stem the selling. The Dow melted down as low as 21,203, a full 250 points from the close on Wednesday. The NASDAQ was again hit full force, bottoming out at 6090, before receiving somewhat to close with a mere 90-point loss.
With the Federal Reserve's loose policy unchecked for eight years running, stock picking has been easier than throwing darts at a barn door. Despite the easy money, most hedge fund and money managers have failed to keep pace with simple indices, a shameful state of affairs for the people who are supposed to know what they're doing when it comes to investing. Now, as everything from the presidency to health care to the media and the future of the global economy is being questioned, the bifurcated reasoning of ultra-low interest rates and gambling recklessly in equities is beginning to lose some favor.
All of this came as the government reported, prior to the opening bell, first quarter GDP at a surprising 1.4% growth rate. This was the third estimate, after the first - back in April - came in at 0.7, and the second, in May, was better, at 1.2, were still below an acceptable range. Apparently, nobody is particularly interested in an economy that is growing at less than two percent, and maybe even less interested in the government's goal-seeking statistical chicanery.
It seems, from all appearances, that the Federal Reserve is being taken seriously about rising rates, if one agrees that bonds tell the real story. The rally in the 10-year note has been shunted, with yields spiking the past few days, opening at nearly 2.30%. The note closed at 2.267, a gain of better than two percent, a large move in treasuries.
Tech stocks were the usual suspects, as the FAANGs took the heat. Facebook, Apple, Amazon, Netflix, and Google all suffered losses on heavy volume.
So, is this the beginning of the end of the bull market?
Maybe. Maybe not. Nobody really would know, though there are those of the opinion that the market is vastly overextended and the core economy is under-performing and facing severe deflationary pressure.
What to watch now are the movie averages. The Dow is still gleefully above its 50-day moving average, but the NASDAQ closed precisely on its 50-day, as is the S&P. Further weakness could send sell signals and a plummet through the 50-day toward the 200-day.
Also to keep in mind is the rough guideline for correction territory, which is casually assumed to be a 10% decline.
The NASDAQ topped out at 6341.70, nearly three weeks ago. A quick look at a NASDAQ chart reveals the collapse on Friday, June 9, exactly three weeks ago as of tomorrow, as if somebody rang a bell, denoting the tippy-top of the market. A level of 5707 would have to be met for the NAZ to fall 10% and it is the most vulnerable index, having had the best run-up over the past three months.
Not that it would be a huge move, though significant in percentage terms, but it would erase gains all the way back to February 9, so just five months of lost appreciation.
Friday closes out not only the week, but the month and the quarter, so it should be instructive from a technical standpoint, if that actually matters any more.
Bull markets do not last forever, no matter how low interest rates are nor how easy money is to lend.
At the Close, 6/29/17:
Dow: 21,287.03, -167.58 (-0.78%)
NASDAQ Composite: 6,144.35, -90.06 (-1.44%)
S&P 500: 2,419.70, -20.99 (-0.86%)
NYSE Composite: 11,739.98, -72.82 (-0.62%)
The VIX, a broad measure of market volatility, spiked today as high as 15.16, a huge move, considering the close on Wednesday was 10.03. That's better than a 50% move to the top, though the slaughter was interrupted and canceled midday, when it appeared the world was ending. No doubt, the PPT another central bank cohorts rushed to the aid of everybody in quelling the panic, sending the VIX back to 11.44 at the end of the session.
The Vix halting helped the major indices to some degree, though it could not stem the selling. The Dow melted down as low as 21,203, a full 250 points from the close on Wednesday. The NASDAQ was again hit full force, bottoming out at 6090, before receiving somewhat to close with a mere 90-point loss.
With the Federal Reserve's loose policy unchecked for eight years running, stock picking has been easier than throwing darts at a barn door. Despite the easy money, most hedge fund and money managers have failed to keep pace with simple indices, a shameful state of affairs for the people who are supposed to know what they're doing when it comes to investing. Now, as everything from the presidency to health care to the media and the future of the global economy is being questioned, the bifurcated reasoning of ultra-low interest rates and gambling recklessly in equities is beginning to lose some favor.
All of this came as the government reported, prior to the opening bell, first quarter GDP at a surprising 1.4% growth rate. This was the third estimate, after the first - back in April - came in at 0.7, and the second, in May, was better, at 1.2, were still below an acceptable range. Apparently, nobody is particularly interested in an economy that is growing at less than two percent, and maybe even less interested in the government's goal-seeking statistical chicanery.
It seems, from all appearances, that the Federal Reserve is being taken seriously about rising rates, if one agrees that bonds tell the real story. The rally in the 10-year note has been shunted, with yields spiking the past few days, opening at nearly 2.30%. The note closed at 2.267, a gain of better than two percent, a large move in treasuries.
Tech stocks were the usual suspects, as the FAANGs took the heat. Facebook, Apple, Amazon, Netflix, and Google all suffered losses on heavy volume.
So, is this the beginning of the end of the bull market?
Maybe. Maybe not. Nobody really would know, though there are those of the opinion that the market is vastly overextended and the core economy is under-performing and facing severe deflationary pressure.
What to watch now are the movie averages. The Dow is still gleefully above its 50-day moving average, but the NASDAQ closed precisely on its 50-day, as is the S&P. Further weakness could send sell signals and a plummet through the 50-day toward the 200-day.
Also to keep in mind is the rough guideline for correction territory, which is casually assumed to be a 10% decline.
The NASDAQ topped out at 6341.70, nearly three weeks ago. A quick look at a NASDAQ chart reveals the collapse on Friday, June 9, exactly three weeks ago as of tomorrow, as if somebody rang a bell, denoting the tippy-top of the market. A level of 5707 would have to be met for the NAZ to fall 10% and it is the most vulnerable index, having had the best run-up over the past three months.
Not that it would be a huge move, though significant in percentage terms, but it would erase gains all the way back to February 9, so just five months of lost appreciation.
Friday closes out not only the week, but the month and the quarter, so it should be instructive from a technical standpoint, if that actually matters any more.
Bull markets do not last forever, no matter how low interest rates are nor how easy money is to lend.
At the Close, 6/29/17:
Dow: 21,287.03, -167.58 (-0.78%)
NASDAQ Composite: 6,144.35, -90.06 (-1.44%)
S&P 500: 2,419.70, -20.99 (-0.86%)
NYSE Composite: 11,739.98, -72.82 (-0.62%)
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